What Is the Main Difference Between a Consumption Tax and an Income

question 43

Multiple Choice

What is the main difference between a consumption tax and an income tax?

• A)A consumption tax requires households to pay taxes only on the income they have left after consumption,while an income tax requires households pay taxes on all earned income before consumption.
• B)A consumption tax requires households to pay taxes only on the income they spend,while an income tax requires households pay taxes on all earned income.
• C)A consumption tax always generates less revenue than an income tax.
• D)There is no difference between a consumption tax and an income tax.

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Definitions:

Units Produced

A measure of the total number of complete units manufactured or completed in a given period.

Units Sold

The total quantity of products that a company has sold to its customers during a particular time frame.

Net Income

The total earnings of a company after all expenses and taxes have been deducted from revenue.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, used to cover fixed costs and generate profits.